• Joe Biden gave a good State of the Union speech this week, focusing on economic policy rather than foreign affairs or culture wars.
• The U.S. economy is currently in a disinflationary boom, with high employment and fast wage growth, but low inflation.
• Biden deserves some credit for this, as he signaled confidence in the Fed Chair, eased sanctions on Venezuela, and reversed his restrictive approach to oil drilling.
• However, two years of high inflation have taken a bite out of wages and incomes, leaving some lasting scars.
• To boost wages and incomes, Biden can increase labor demand by pumping up investment, and increase labor’s bargaining power by passing the PRO Act and staffing federal agencies with pro-union people.
• Biden’s grand unified theory of Bidenomics includes three pillars: investment, cash benefits, and job provision in care industries.
• Biden has been pushing for investment to boost labor demand, but so far there has been no investment boom.
• The U.S. is facing delays and high construction costs that are preventing investment from happening.
• Biden needs to tackle the basic problem of stymieing investment, not just spend more money.
• To boost wages and incomes, Biden can increase labor demand by pumping up investment, and increase labor’s bargaining power by passing the PRO Act and staffing federal agencies with pro-union people.
Published February 9, 2023
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